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RBS announces restructuring plans


Royal Bank of Scotland (RBS) has announced that it will transfer £38 billion of its riskiest loans into an internally managed bad bank, ring-fencing these assets - such as loans they do not expect to be repayed - in order to protect the 'good' part of the organisation.

This means the bank does not need to be effectively split into two and could position on the journey towards becoming re-privatised - it is currently 81 per cent owned by the government following a bail-out.

RBS has also launched an examination of many of its auxiliary structures, including its IT operation, as it attempts to improve its relationship with customers.

However, the move is likely to trigger an impairment charge of around £4 billion, meaning it will make significant losses for the year which it plans to offset with the sale of its US arm Citizens.

"For the first time since the crash we now have the Treasury, Bank of England and management fully aligned on strategy," an aide to George Osborne told the Financial Times.

New RBS chief executive Ross McEwan said he was delighted the restructuring plans will allow the bank to move forward and attempt to rebuild following the difficulties of the last few years.

With Bank of England governor Mark Carney recently expressing his enthusiasm about the UK's vibrant financial services sector, there are hopes the nationalised bank will be able to play a part in economic growth in the future.

However, as of now there are no concrete plans to reduce the government's stake in the operation.

"These actions should create a more resilient institution that is better able to support the real economy without any expectation of further government support," said the Bank of England.

RBS, like other banks, was caught up in the PPI mis-selling scandal and is expecting further losses as it works to recoup consumers and rebuild trust following this issue.

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